by CORENTIN CHAPRON
PARIS (Reuters) – Wall Street is expected to rise on Friday, while European stock markets hesitate at mid-session, divided on the trajectory of rates in developed economies.
New York index futures suggest Wall Street opening in the green with a gain of 0.07% for the Dow Jones, 0.16% for the Standard & Poor’s 500 and 0.35% for the Nasdaq.
In Paris, the CAC 40 dropped 0.53% to 7,175.41 points around 11:15 GMT, compared to an increase of 0.7% for the FTSE in London, while the Dax in Frankfurt lost 0.17%.
The pan-European FTSEurofirst 300 index fell by 0.1%, the EuroStoxx 50 by 0.27% and the Stoxx 600 by 0.2%. Investors are digesting decisions from numerous monetary policy meetings this week, including that of the US Federal Reserve (Fed), which suggest that peak rates are near and perhaps already reached, but that rates will remain restrictive for longer provided that.
In fact, the Fed did not raise its rates, but took a break warning that inflation was still far from returning to its target: the projections published on this occasion indicated that it would return to only 2% in 2026 .
However, these projections seem to support the scenario of a “soft landing” for the American economy, which would result in a slowdown in inflation without recession or too sudden a rise in unemployment.
Furthermore, the Bank of England (BoE) and the Swiss National Bank (SNB) surprised the markets by also decreeing pauses in their monetary tightening cycle, suggesting that the inflationary dynamic was slowing sufficiently.
The end of rate increases is nevertheless not synonymous with support for stocks: the PMI indicators published on Friday show that activity in the euro zone is in clear decline.
“History suggests that the performance of stocks after the last rate hike depends on the subsequent performance of the economy,” remind Bank of America strategists.
“Given the sharp tightening of this cycle and the weakening of fiscal support, we expect weaker growth going forward, implying a 15% decline in European stocks,” they add.
VALUES TO FOLLOW IN WALL STREET
Britain’s antitrust regulator, the CMA, said Microsoft’s revised proposed $69 billion acquisition of Activision Blizzard “opens the door” to clearing the largest-ever video games deal .
VALUES TO FOLLOW IN EUROPE
Ubisoft jumped 4.04%, signing one of the best performances of the Stoxx 600 after the announcements of the CMA, the French video game publisher being likely to recover the “streaming” rights of Activision games.
Veolia is the bottom of the CAC 40, the group falling 2.12% after announcing the departure of the financial director of Suez.
Solutions 30 (-16.94%), at the bottom of the SBF 120, reported on Thursday a widening of its net loss in the first half.
Dutch banks fall after Dutch lawmakers announced support for a proposed tax hike on banks to cover an increase in the minimum wage and greater childcare support in 2024. ING loses 4.63% and ABN Amro 3.51%.
RATE
Bond markets are calm after two adjustment sessions following the Fed’s decision. The German ten-year yield is stable at 2.751%, while that of the two-year rate loses 1.9 basis points (bp), to 3.249%.
The ten-year Treasury yield remains at 4.4884%, compared to an erosion of 1.2 bps to 5.1377% for the two-year.
CHANGES
The dollar continues its progression, still supported by the Fed’s decisions, gaining 0.26% against a basket of reference currencies. The greenback is near its highest level in six months.
The euro dropped 0.19% to 1.0638 dollars and the pound sterling 0.35% to 1.2251 dollars. The British currency is still suffering from the BoE’s announcements.
OIL
Concerns over Russian fuel exports were rekindled after Transneft on Friday halted deliveries of gasoil and diesel to Baltic and Black Sea terminals.
Brent rose 0.87% to $94.11 per barrel, with American light crude (West Texas Intermediate, WTI) nibbling 1.06% to $90.58.
NO MORE MAJOR ECONOMIC INDICATOR THIS DAY
(Written by Corentin Chappron, edited by Claude Chendjou)
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